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Jobless rate hits 9.4 percent in May; layoffs slow

With companies in no mood to hire, the
unemployment rate jumped to 9.4 percent in May, the highest in more
than 25 years. But the pace of layoffs eased, with employers
cutting 345,000 jobs, the fewest since September.

The much smaller-than-expected reduction in payroll jobs,
reported by the Labor Department on Friday, adds to evidence that
the recession is loosening its hold on the country. It marked the
fourth straight month that the pace of layoffs slowed.

Still, the increase in the nation's unemployment rate from 8.9
percent in April underscores the difficulties that America's 14.5
million unemployed are having in finding new jobs. Economists had
expected the rate to hit 9.2 percent last month.

If laid-off workers who have given up looking for new jobs or
have settled for part-time work are included, the unemployment rate
would have been 16.4 percent in May, the highest on records dating
to 1994.

Even with layoffs slowing, companies will be reluctant to hire
until they feel certain that economic conditions are improving and
that any recovery will last.

Since the recession began in December 2007, the economy has lost
a net total of 6 million jobs.

As the recession - which is now the longest since World War II -
bites into sales and profits, companies have turned to layoffs and
other cost-cutting measures to survive the fallout. Those include
holding down workers' hours and freezing or cutting pay.

The average work week in May fell to 33.1 hours, the lowest on
records dating to 1964.

Job losses - while slower in May - were still widespread.

Construction companies cut 59,000 jobs, down from 108,000 in
April. Factories cut 156,000, on top of 154,000 in the previous
month. Retailers cut 17,500 positions, compared with 36,5000 in
April. Financial activities cut 30,000, down from 45,000 in April.
Even the government reduced employment - by 7,000 - after bulking
up by 92,000 in March as it added workers for the 2010 Census.

Education, health care, leisure and hospitality were among the
industries adding jobs in May.

Still, in another encouraging note, job losses in both March and
April were less than previously thought. Employers cut 652,000
positions in March, versus 699,000 previously reported. They
eliminated 504,000 jobs in April, less than the 539,000 initially
estimated.

The deepest job cuts of the recession came in January when
741,000 jobs disappeared, the most since 1949.

Federal Reserve Chairman Ben Bernanke repeated his prediction
this week that the recession will end this year, but again warned
that any recovery will be gradual.

Many economists believe the jobless rate will hit 10 percent by
the end of this year. Some think it could rise as high as 10.7
percent by the second quarter of next year before it starts to make
a slow descent. The post-World War II high was 10.8 percent at the
end of 1982.

The Fed says unemployment will remain elevated into 2011 given
the expectation of tepid recovery. Economists say the job market
may not get back to normal - meaning a 5 percent unemployment rate
- until 2013. Economic recoveries after financial crises tend to be
slower, economists say.

Evidence has been mounting that the recession is letting up,
with fresh signs emerging earlier this week.

The number of people continuing to draw unemployment benefits
dipped for the first time in 20 weeks, and first-time claims also
fell. Manufacturing's slide is slowing. Builders are boosting
spending on construction projects and a barometer of home sales
firmed.

Although shoppers remain cautious according to sales results
from major retailers, Bernanke and other economists are hopeful
that consumers won't return to the deep hibernation seen at the end
of last year.

That's when the recession hit with brutal force, causing the
economy to contract at a 6.3 percent pace, the most in 25 years.
Consumers cut their spending at the time by the most in nearly
three decades. Economic activity shrank at a 5.7 percent pace in
the first three months of this year, despite a rebound by
consumers.

Many analysts believe the economy is shrinking at about a 2
percent pace in the current quarter, and that the economy could
return to growth as soon as the third quarter. President Barack
Obama's stimulus package should help bolster the economy.

Ripple-effects from General Motors Corp.'s filing for bankruptcy
protection - the fourth largest in U.S. history - could muddy the
outlook, some analysts said. GM said earlier this week it will
close nine factories and idle three others indefinitely as part of
its restructuring. The closings, which will take place through the
end of 2010, will cost up to 20,000 workers their jobs.